What is in this article?:

It didn't take Eric Lofquist many years before he decided he wasn't cut out for the corporate life. "I looked a little young and you had to look a certain way and be a certain way in order to move up in the corporate world rather than strictly performance," he recalls. At 28, he struck out on his own.

Now 52, Lofquist is reaping the rewards of an entrepreneurial career. He founded Magnus International Group, based in Independence, Ohio, in 2007. The growing company produces a variety of sustainable products, including all-natural waxes, renewable fuels and animal feeds. In November, he was honored by Ernst & Young as Entrepreneur of the Year for distribution and manufacturing.

The United States is still the land of opportunity, according to the Global Entrepreneurship Barometer. The measure of productive entrepreneurial performance, developed by George Mason University's Center for Entrepreneurship and Public Policy, ranked the U.S. first among 80 countries. Approximately 3 million new jobs are created each year by new firms in the U.S., according to the Kaufmann Foundation.

Companies that have been finalists for the Entrepreneur of the Year award are creating jobs and posting revenue growth at a far higher rate than U.S. businesses as a whole, according to a report released in November by Kaufmann and Ernst & Young.

What makes these firms successful? The report identified characteristics such as a passion to solve unmet needs in the market, the ability to bounce back quickly from setbacks, and an embrace of innovation. The report also noted that entrepreneurs made their people a priority and were able to communicate their vision and instill great passion in their teams.

These entrepreneurial characteristics are precisely what a growing number of companies are trying to promote in their organizations. These efforts range from small "skunkworks" units designed specifically to pursue innovative projects to allocating time to employees so that they can pursue new ideas that intrigue them.

"It is incredibly important in today's hypercompetitive environment where technology and the macro-economy are changing so quickly that companies think much more entrepreneurially," says Bruce Bachenheimer, clinical professor of management at Pace University.

"Promoting corporate innovation goes hand in hand with how a company creates and maintains an entrepreneurial environment," says John Zegers, director of the Georgia Center of Innovation for Manufacturing, a division of the Georgia Department of Economic Development. "Entrepreneurial activities are ones in which you are doing something to create new opportunities, and innovation activities are ones in which you are doing something new to gain a benefit in your product, process or technology. I believe it takes an entrepreneurial spirit in order to innovate."

Fighting the Innovation Implosion

If established companies tend to become less entrepreneurial and innovative over time, it might be because they tend to reflect their top leadership, says Hal Gregersen, a professor of leadership and innovation at INSEAD and co-author of "The Innovator's DNA" (with Jeff Dyer and Clay Christensen). These companies develop a business model and operations that are familiar and are working well.

"If I am a senior manager or executive, I probably built this business model. My imprimatur is on many parts of this company. Many chunks of that are my creation and, I got promoted because it worked," says Gregersen. "You add all these things up and it becomes increasingly nonmotivating for a senior manager to shake it up."

Moreover, stresses Gregersen, company leaders need to engage in the behavior that leads to innovation and the launch of significant new businesses or products. He says many ask provocative questions, an important element, but they fail to engage in other necessary activities such as closely observing the world, developing networks of diverse contacts and actually engaging in experiments and prototyping.

"Established leaders engage in creative activities less and less over time," says Gregersen. "Their companies reflect that subtle but significant shift in their own orientation." Both leaders and staff become increasingly focused on delivering results rather than on creating new products and processes.

Gregersen contrasts that with an entrepreneurial CEO such as Scott Cook, founder of Intuit. "He is constantly peppering the worlds with questions like what was surprising, what was unexpected in whatever you just experienced. How many senior leaders care about that? He cares."

Because Cook continues to demonstrate that behavior, says Gregersen, it is hard for the Intuit organization to "let go of that entrepreneurial bent when you have somebody at the top of the organization who doesn't." He adds: "I think the innovation implosion that has occurred in a lot of mature industries is a function of this complete lack of an innovation habit at the top of the organization. They just don't do it anymore, if they ever did."

Leadership Category Sponsored by Plex

The Plex Manufacturing Cloud is the first and only cloud ERP built for the tough requirements of today’s manufacturers. Over 400 innovative companies use Plex to operate their manufacturing businesses.